ATO guide to the 5 most common Tax Time mistakes
As Tax Time 2018 has 'kicked off', the ATO has profiled the five most common mistakes they see, including taxpayers who are:
leaving out some of their income (e.g., forgetting a temp or cash job, capital gains on cryptocurrency, or money earned from the sharing economy);
claiming deductions for personal expenses (e.g., home to work travel, normal clothes or personal phone calls);
forgetting to keep receipts or records of their expenses (around half of the adjustments the ATO makes are because the taxpayer had no records, or they were poor quality);
claiming for something they never paid for – often because they think everyone is entitled to a ‘standard deduction’; and
claiming personal expenses for rental properties – either claiming deductions for times when they are using their property themselves, or claiming interest on loans used to buy personal assets like a car or boat.
ATO Assistant Commissioner Kath Anderson reiterated the three 'golden rules' for work-related expenses: "You must have spent the money yourself and not have been reimbursed, it must be directly related to earning your income, and you must have a record to prove it."
Transacting with cryptocurrency
With interest in cryptocurrencies (such as Bitcoin) increasing, the ATO has issued guidance regarding various tax consequences of transactions involving cryptocurrencies.
Any capital gains made on the disposal of a cryptocurrency (including using the cryptocurrency or converting it to Australian dollars) may be taxed, although certain capital gains or losses from disposing of a cryptocurrency that is a 'personal use asset' are disregarded.
Cryptocurrency may be a personal use asset if it is kept or used mainly to purchase items for personal use or consumption (but the longer the period of time that a cryptocurrency is held, the less likely it is that it will be a personal use asset).
Note: If the cryptocurrency is held as an investment, the taxpayer will not be entitled to the personal use asset exemption but, if they hold the cryptocurrency as an investment for 12 months or more, they may be entitled to the CGT discount.
If the disposal is part of a business the taxpayer carries on, the profits made on disposal will be assessable as ordinary income and not as a capital gain.
The ATO has also provided guidance regarding the tax consequences of the loss or theft of cryptocurrency, as well as of 'chain splits'.
Cents per Km Deduction Rate for Car Expenses from 1 July 2018
The Commissioner of Taxation has determined that the rate at which work-related car expense deductions may be calculated using the cents per kilometre method is 68 cents per kilometre for the income year commencing 1 July 2018 (up from 66 cents per kilometre).
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek the team @ Clear Accounting Solutions to independently verify your interpretation and the information’s applicability to your particular circumstances.